Chewy (CHWY) 30 Aug 232023 Q2 Earnings call transcript

Good afternoon. Thank you for attending today's Chewy Second Quarter FY '23 Earnings Call. My name is Anna and I will be your moderator for today's call. [Operator Instructions]

I would now like to pass the conference over to our host, Jen Hsu, Head of Investor Relations, you may go ahead.

us XXXX call results. joining our to for quarter second you on today the discuss Thank

Joining and Bowman. Interim are CFO, me Chewy's Stacy CEO, Sumit Singh;

Our the Investor were section of shareholders, earlier letter investor.chewy.com. has Relations earnings website the today to with SEC which posted been our release and filed to

to we statements XXXX risks, be our forward-looking Factors those cause to financial differ described in investments, forward-looking considered trends, and factors by subject statements, strategies our under quarterly Securities results, statements XX-K concerning On and the Risk and Such Report actual will in results of our Litigation call Annual subsequent are could including to Form business on to uncertainties, and successfully contemplated forward-looking statements Reform statements. respond ability which from today, our entitled materially are prospects, making risks. Chewy's future and Private industry certain the section other other reports, Act

not as indication this call considered should disclaim by statements on on available information except any Reported an based update today's statements as performance. us date. to to of Also that law any We forward-looking are results forward-looking be of note the obligation required future

and intended filed Reconciliations which we measures as our certain shareholders, will non-GAAP website results. during SEC most Also call, earnings not this non-GAAP to non-GAAP of financial release the for letter were items comparable financial in a discuss our GAAP today. measures Relations on are Investor measures. GAAP these and directly the to with These substitute are provided

accordingly XXXX quarter refer today quarter of noted, and XXXX. Additionally, to results discussed second unless all are comparisons the second of against the otherwise

website replay will being its website. shortly. in our this Relations on entirety also call call of on our Relations webcast Investor available this Finally, is Investor be A

like to call the now to turn over Sumit. I'd

joining Jen, today. the all thank you call on Thanks, and us for

Before we Chief Accounting to our introduce begin, Bowman, Officer. want I Stacy

a serving is deeply for and permanent our we respected who finance CFO, with retired more processes. systems, with as CFO, for Stacy. leader, and while on Mario is Welcome, is Stacy, previously years July continue Marte, announced, been to She and familiar our has As a XX, eight search Interim organization, than CFO. Chewy

begin. let's Now,

reflecting quarter the our in second QX we carried as , XX% we per net on X% flat exceeding a while billion with well trends expectation, mid-teens EBITDA basis, a or customers and adjusted active Consistent in positive profitability. growth net were sales margin. increase. as our Our a sequential up on In XX% reached guidance $XXX, saw customer active sales, reported NSPAC delivering broadly results robust $X.XX QX,

topline, increasing driven of engendering key than business net Autoship their Chewy's predictability, quarter. recurring while our sales grow and growth XX% pace strength to Net of customers, strong a across continued by ecosystem. including many This model, of Autoship, our remains a customer total was areas, differentiator where high ever-increasing participation visibility the to share enabling sales sales underscoring momentum streams from second loyalty. evident focus in revenue by Chewy the was our the faster of underpinned at

Additionally, the are platform. Health driving we of successfully also Chewy our discovery

and into penetration CRM XX% active nearly Chewy, are continuously teams across For example, pharmacy cross-category improving base. enhancing customer now of Elsewhere our capability, overall our targeting, engagement. strong represents our customer supporting

was robust expectation. broadly The in the profitability. line down of with gross of delivered we margin another quarter Moving P&L, XX.X%

the however, the in environment in promotional higher activity second remains largely the rational. was the whole quarter first anticipated, promotional than on As quarter,

remains growth for benefiting Canada for the from X% Adjusted on gross expansion, launch. our investments, of a the trends track fulfillment quarter, came in our at and which margin impact strong by exciting cost efficiencies, margin EBITDA offset our QX including

these flow our during our to initiatives. growth utilize cash to call, portion free growing of continue indicated we meaningful QX earnings we self-fund As a

facilities XXXX. efforts years. our Combined, source a early in of them ramping driver is opening provide we of four be expect to upside. automated continued the a in automated to efficiency additional our site continue margin Two still Additionally, to operating our as improvement automation as well are of both and date, fifth future

a spending Before out and Chewy. NSPAC initiatives, share particular active the on our trends business of on these how time the consumer in customers pet let and behavior perspective impact industry me at in may Coming being higher summer discernible, months, in mindset same time, consumer a trusted the consolidate to shift sensing share of retailer at of their their more wallet willingness towards we are to choice. and with

which This past inflation, have macro-environment, levels including been behavior a the high driven fluid over through more passed of industry the is by months. XX

confirms suppliers throughout of ways Chewy, these customer are given many sales the our pressures mix our we our of insulated healthcare these XX% QX nearly from are pet with dialog At in and businesses, high-quality trends consumables the net permeating Our which our that industry. drove in base,

competitive of customer Autoship and service, powerful unparalleled healthcare Our and prices, our experience, subscription service. overall convenience, promise best-in-class

these demonstrate key attributes and customers robust continue recognize strong support Our ordering continues to performance. as turn in which behavior, loyal our differentiators to

potential share point, strong evidenced Further of record sustainable of track see with our growing our we significant to by expansion. NSPAC to continue customers, wallet this existing

As grown $XXX around the up XX% time. quarter, you over may year in we to preceding have this NSPAC our that from $XXX recall, approximately IPO

uptake our record to NSPAC majority the efforts, ecosystem, large our sustainability us track growth. This driven strong the have customer with saw potential increasing ongoing and and the outperform pet our as we of of benefit Autoship industry spends from and growing deliver well modest program underscores expansion. as increases as profitable the of price that such Chewy our over base a more time Health While

household fully factors current above, currently I remains facing from be insulated not some pet together, consumer to period formation the industry. Now, muted are more are to make the others, while and environment That exempt pressure a the we forecast continues as pressured. relatively mindset taken than is These the consumer challenging we mentioned behavior.

but potential the second to in now expecting for of see are potential continue growth wider a light outcomes. returning we we recent trends, year, consideration, to of into during range of the this net-adds this Taking half

adds. the to drive make macro just as we trends active dynamics While forecast not and I Chewy improved customer to to These believe are net consumer and challenging well-positioned are factors we normalize. behavior trends, specific industry-wide described, patterns it

an on like I our initiatives. some to of Now, update provide strategic would

Our convenient into US Canada high finalizing hard upcoming the expansion work category, on the this bar a are fast-growing and year. remains represents service experience pet teams Canadian QX that for ensuring at customers and of selection, same delivery market enjoy. large our and our track

will growth compelling on roadmap over executing are one track we a and ads, In We come. the to look of against to our to remain forward sponsored quarters progress prospective sharing margin-accretive our program vectors, to year we second the update as XXXX. We the on progress and the remain you half the ramp throughout by ahead business. of and encouraged opportunity scale the continue into

Chewy expansion. strong potential points, have and that we points. growth adjusted since we billion, basis host this IPO, pet XXX getting Lastly, our north margin net Day of sales gross by industry year. drive tripled margin long I'm as both EBITDA and with margin and to runway just broader way to by Investor nearly excited still started that outperform well as come our expanded XXXX the significant $XX to to clear intend first are Yet, later has a announce basis considerable X,XXX having nearly our believe we

our roadmap expectations dive our and long-term our reflect and in the once QX. forward QX we on sharing integrated exciting showcased highly Chewy ecosystem, achieved strong a we to high the of customer levels pet deep ahead, look of our We platform. the I recalibrating that results and a see that in to engagement platform. of particularly strength proud consumer category In durability secular We our resiliency and upside growth demonstrated closing, in operate unveiling financial am again

With to Stacy. over will turn I that. the call

Thanks, Sumit.

XX.X% second of I this role. sales of approximately Non-discretionary to in or collectively to forward net net engaging meaningfully the continued XX% billion. to $X.XX look second-quarter you many consumables sales. to with and $XXX categories representing million the new quarter, growth quarter, In healthcare contribute grew in

XXX flat and billion, sales QX $XX.X points. growth outpace Autoship net a customer now sales. basis basis continue sales broadly million. on Active total XX.X% customer finished and Autoship represent were remained at $X.X aggregate topline by of XX.X%, to sequential customers almost up

NSPAC customer $XXX. customer However, highs. and reached XX.X% grew new sales our measure to Autoship yet record Notably, primary both NSPAC again engagement of

where As certain financial expansion, broadly XX.X% and as filings, same SEC consistent we XX move refers down basis to expense my quarter. financials excluding that applies disclosed margin reached which the applicable for well reflects point metrics and share in with the base in discussion to outlook. guidance our my relevant. compensation of expectations P&L, discussion please Gross as where note a of The QX, taxes, other related our adjustments

$XXX.X driven million corporate totaled our and Continuing growth. This quarter to XX sales, sales of of expected SG&A ads excluding compensation XX.X% onto second growth into sponsored realizing the share-based as by net points increases related basis associated expansion net our taxes, increase compared temporary Canada, OpEx, and of was initiatives to largely such related the or ahead XXXX. payroll deleveraging

expectation The continued sales, $XXX.X with efficiencies, our SG&A of net deleveraging was was to supported initiatives. marketing advertising net cost X.X% sales. our QX or of by partially million by consistent mitigated fulfillment automation of X% X% and expense

an million. net million, quarter adjusted $X.X Second income of $XX.X was increase

X.X%. The an $XX.X million, $X.X of margin million, second up adjusted implying reached EBITDA EBITDA quarter adjusted

million net and by projects. comprised Second expenditures. primarily capital investments center $XXX.X operating technology quarter ongoing Capital were fulfillment of cash in in and free cash flow reflecting was activities $XX.X $XXX.X million, million provided expenditures automated

regularly a intensity reminder, see quarter-to-quarter. we CapEx As from fluctuations in

intensity the the spending below-average CapEx Following quarter. in in increased first CapEx quarter, second

in time cash QX we concludes higher marketable this X.X% $XXX marketable we between second ABL, to XXXX last nearly cash-on-hand, That the of of cash with billion. remain remain securities, at our X% and and $X.X balance equivalents finished to and QX net end capital on We recap. At availability our at liquidity in million stood the Overall, $XXX.X the securities, of than quarter expect range million expenditures year and my debt-free. sales.

year So cover me third now guidance. and quarter our full let XXXX

a along that and the outlook. reflects evolving our business strength on guidance model economic with latest the engagement, incorporates view the balanced views of our always, As customer

to third-quarter of year-over-year $X.XX X% be approximately between and representing expect $X.XX net to growth billion We sales billion, X%.

our $XX.XX of XX% approximately compared to are full-year growth XXXX. net billion, full year to sales billion of XX% representing the to We $XX.X reiterating XXXX outlook

X%. full-year approximately outlook our adjusted margin reiterating also are of We EBITDA XXXX

that in flow X.X also cash approximately XXXX. our the free models, cash full-year your flow free we note full update times you for be the we XXXX As to year expect generated

to the to our I'd like execution We is that open of macro-environment. is and resilience evolving well-equipped as to sustainable, model road our believe profitable we earnings driving Chewy an Before of deliver in grounded our call that strong philosophy operating the in ahead second-quarter exceptionally questions, reiterate navigate performance, the operating strong reflect our growth.

call over questions. the turn I'll to the that, operator with And for

Our Instructions] Doug the is of [Operator with first JPMorgan. Anmuth line question from

You may proceed.

Thanks about your taking so math guidance Sumit, if piece around half, the back are for X% much here, questions. active business. hard more for factored ranges a which acquisitions right, of my pretty not wide. outcomes much feels it's the wider to the in even curious how goods-driven of the talk you could And is though if big customers XQ XX%, range

those you of Thanks. both hoping us help Just can understand happening at what's extremes?

the Okay, clarify just somehow revenue or about guidance range, is customer you're range? guidance talking to guidance range

implied revenue XQ? the Yes, guidance for Revenue. range

head-on, wider. estimating of net a not, communicated to that we're That's on not Okay. thinking. that's We're be We just that. outcomes wide bit clearly how to address adds range the so

And the while we're that, scenarios. in couple back the certainly types of of of different half growth I But of year. a sort back the expect that's modeling on We possible, from about the engagement customers the from reiterate good pretty which our we ordering guidance that platform. actually provided, we seeing to strength we're those and on customers given feel that the want

net kind Now range color active that we a couple of wider adds go or wider projecting been let we've you on kind the the outcome back me in adds of and are having give or of last why conversation the on quarters

to I'm here. So into the essentially provide I'll what's details is, a happy dive short course. happening

for of adds during half, with previously communicated, of we were this a headwind diminish first that half cohorts. majority to now a the mark the to impact COVID continue the expect consistent that year, these net large reached the where we we've So in the cohorts to what two-year second

a and really time, us, discernible more of much seen more in At May for is started the did we've in and QX it same than coming customer out it July June. what slightly

forecast believe this given is behavior for customers, we're just projecting we And to cohorts who's we difficult yet the have enough so high macro now distracted through. seeing we earn have they that experience the have And to haven't of time to right we're kind the had pressure, given just work pressures trust, they their had work is under inflation, proving because more forward that and what the recently-acquired to to they're harder and current it play by of are - for simply more to will harder, Chewy newer we magic. the or we what is, cycles to the haven't

value customers we execute that that to that of much know term, deliver sharply Chewy. we near cohorts to to value as seeking So to customers we are already loyal win we even have are in them more winning with are with the as the such that the

stay The wallet really two share with of it's kind loyal they're So of loyal us. cities. cohorts and their of consolidating a tale

play confident or the half, our the is which sensitivities. August July Yes, trends to is into half so but guidance, and of were that back share-winning back hey, year. say, driving So we going we're delivering expansion aperture the causing us way should the is a by about of the range widen here projected then on maybe through the and far position of NSPAC kind a what's being that slightly recent in to holding is be this pretty

if us between XQ could pricing? NSPAC. follow on up and Can and help inflation just just like-for-like of out kind I happening what's And you XQ parse

that in pricing if in the see ways so essentially, came hear. want half going different going we some 'XX. back-half of Yes cost pricing, impact is on first sir, through of provide can in right, to also to them the from increases 'XX, benefited and the to XH you're two But what is Stacy you color,

weighted, and not into and towards our going So growth the combination, volume as is back is a revenue half, overweighted driven price composition price. the

benefit. NSPAC, confidently over On as decomposed inflation NSPAC, we state can is has or years deconstruct modest that provided past we our what NSPAC the our a

is greater north plus in the plus development seeing health So of Autoship cetera, development XX% NSPAC cetera. two-thirds organically kind than greater of et the to growth than we're that of benefit et development cohort

in we generally ASP little QX, time So expect more like season it's obviously, of accretive. compressions kind the And holiday that given a take that. all the place and transactional

the a transactions it's bit QX. more So than

Sumit. you, Thank Great.

Sure.

Thank Mr. you, Anmuth.

Goldman Our is with Sachs. next question from Eric Sheridan

You may proceed.

advertiser us from learnings and how the that about with launch rollout? the Thank later for Thanks wider that much you've of you to debating you the ads line-up this the and this end partners on of of some more working to be to key want can business the elements fiscal Maybe so both you're next coverage ads come you had the of Maybe taking And back thinking things the so or should question. potential year year? to business into much. we year. trying on ad response, ahead be refresh

on is point experience obviously well just limited very we proves product platform the launching. sure guardrail that a supply that of doesn't which essentially overrun that but also. our have we're the we to The that the thoughtful exceeding cities is up supply. as sort enjoy, have sure opening opening of on is sure demand the this right as Eric, the conviction make them to that a come that team suppliers, that make we're product is it quality opened the customers up is and behind supply to get to want organic by of - the of making up Sure. tale two the The now far kind

for we're the on that. always to been ramp and in So has up XH this plan track

sort hold opportunity perspective we that that we fact, X.X% program X% program our into we squarely the now to of range, kind were the X% as the kind the as of in thinking of X%, of takes thinking and of forecast off as this kind scales, the had In original per se. aperture coming widen of

into and you high. converted with going rather suppliers in per that our is therefore, is the we a response the least have vendors go-to-market customer participating ad our particularly Chewy are or the is our believe one-time sure an forms appropriately compelling are high, focused, LTV are most appropriately suppliers to aware se, the to deal brands ROI seeing been quality and that our allow of an is manner. which teams seeing more So business, basis as is that the platform we subscription type rate than are kind make even will market run the build in is ROI that bar of of and the at their right transaction execution always strength the of and platform there, nature of experience to the

Thanks Great. for color. the

Sure.

Sheridan. Thank Mr. you,

question line Citi. with Zaccone Steven next of Our from is the

proceed. may You

what Hi. consumer just Stacy, that seeing my gross the of commentary you a to you and hoping period does smaller margin and could the start, harder role. versus need a summer of on at these congrats you on changing And bit assume little implications? some makes we more from customers, trend was these Good the guess the should question. it's Sumit, the two-month about down, thanks out afternoon, with for months. customers I are concerned, end new work new that when seeing promotional more at a you new more mean taking baskets elaborate the say you you the like, trade at summer? Are

Sure, so question. sure, sure. great Yes, it's a

seeing yet. we trends? concerning are not Not really, So,

more of So a we've by the July, is consumer towards of more off, food, an that we're time I noticed dry the really behavior. kind wet and what For food generally saying, in mean discernible? more the observing a bit do become first out value-seeking shift indication

of traction QX, to come yet a back pulled out bells, out we're material back out because, but pull it's slightly of not coming XXXX July, we're little insulated. we actually particularly bit. in alarm treat of have believe kind and fairly they QX raise any in seeing not and gained also and coming We're They

So happening color to and kind and I think like give color, some let me we on what's context the gain of here. give broaden the you really aperture

was to So from pandemic. with all the the XXXX, 'XX about storyline dealing

the out of passed rose of this year, have way costs became of last prices. So coming stabilized, period right, high by year but XXXX dramatically onto through been and the Supply-chain unprecedented recovery. consumer

are And now also up pressures these industry-wide impact. inflationary and showing

'XX. household the of that formation pet changed through recall continues that for and already Now, but half muted, hasn't first was XXXX

indicates In the addition out at to more point. that, sense this here, it calling being that value-conscious, consumers this behavior am that of I kind that And makes

majority like mean times that value both I sense, And but consumer the We towards current do the in value we and offering we given full of consumers, from is to and that. in therefore, business convenience times a think and value these, convenience. our believe that for the them of impact preferences model. we somewhat winning makes combination both the we're convenience these the insulated offer the believe strength

Now their et Their be we off. that for right, we hard Usually when cetera. - be frequency weeks, behavior see to back might were recently order customers five slightly acquired four in weeks, customers, is right. purchase come predict, might

this are So we developed believe that kind deployed, into that the more latter of of the the much the towards be we've last and be CRM year we to towards we year, sharply have right, sharp half deployed half year. it those that going to back extra of capabilities

as the not are we right. to we market lead do promos, of terms in So never going

respond. be stand to price kind se, doesn't as have ways not to in and of could value tactics ready we going on be creative to that per to pass are self-fund, but the other Internally, right are customer to price to we that followers the We it way, promo-led find well. ways are leaders

of kind of to improved as can year series in new roadmap into of hopefully, a but of net recently as I taking account HX as strategy our are we have also that'll both color. acquire as where formulate well provides that that the customers next We a retention acquired bit cohort. continue, well

back all guess, think of half we I into you then. No, the gets promotional the color. brief helpful. overall a Do I get more appreciate that industry that's just year. very the follow-up have as

activity of I'm curious promotional? So you've has seen, peer your gotten set the of as what two months more

that. do We expect

so call been you has expectation but kind our both So of the from about if QX itself. recall, than activity QX, relative QX higher and our we've in the been far And been XXXX pandemic greater we to years, we've transparent lower saw promotional expectations. promotional our of promotionality activity

we've promotions As first move into be the from half to our promo to half, the are continued an incremental second bake going because higher of in spend back that we half in is year. expectation

stand we're to that looking but lead to respond customer the So demand both to like are said, market, I ready make we experience protected. sure not and

in the all details. the of Best for back luck thanks half. Okay,

you. Thank

Thank Zaccone. you, Mr.

from next the question with Andreeva is Anna Our line of Needham.

You proceed. may

so afternoon, you Thank Great. much. Good guys.

on follow-up question. previous Just a

as how should on quarter, think the about you the a XX third back color comments your was points XX secondly, split for promo potentially in the the then less back-half? margin basis or any amount evenly balance more approach think gross just Canada just higher the on for to as about given talked in basis we Just and follow-up, about we should the we industry the had year, the investments quarter half? this from second points what And

first Stacy, on gross margin. take Sure, Hi I'll is Anna, the question this

but balance gross typically typical gross of XX% we some level to good it to don't from know, So margin do for but we quarter-to-quarter, as the give feel the expect margin, and this around formal quarter is see fluctuations around the guidance year. about we you note remain

Longer-term, margin is room we're left gross believe still excited because there for we meaningful expansion.

initiatives such as ads are in margin accretive. we in Sumit have continue are high-margin existing to like share verticals grow new as mentioned earlier, and and and that Chewy Health sponsored investing market we So scaling gained also example, for

are second to the implies consumes EBITDA that going the make. the we guidance investment of on and essentially question, And level

the year, into will of sponsored see the which continue is - ramp baked Canada other guidance. verticals such we investments through ads half the into started ramping as et up QX, cetera they those and started to back So we and in

expect continued dilution are we up some on on about of in. as fulfillment we QX also recall, then talking - or call, the year, to the finally, we promotional - short-term new of in incremental and launched our the in that ramp And you going should middle that pace has if are middle of centers mentioned, baked result Also, is a promo we environment that. which its

So that's profit kind of built on formulates a guidance half. for way the that is for the back basis -

right, thank much, guys. All you so

Sure.

Andreeva. Ms. you, Thank

Our next question William Blair. Carden is Dylan from with

proceed. You may

Thank you very much.

trying I for of what So, just envisioning wider customer kind keeping to the in net And a the reconcile I'm idea the be guidance am curious range of ads, or for of anticipated that? year, doing outcomes now might positive? still optionality just levers you albeit

expectations How done exceeding our question? the basically is own we've on Dylan, that

seems the ads back customer of guidance sort half as there the It keeping on net in then kind is caution certainly it is. the and of like

up? so trying two be said the the at you as And where seems third to you quarter just is to reconcile understand

we're open is we're The okay. drawn balance it, strength seeing strength the seeing, that that Dylan Got customers. the essentially from

market are penetration Autoship prices steady. holding pretty up good. So rates are holding up pretty,

Asset steady. into are holding Autoship up

ordering for existing our customers. And higher was so frequency

- to perhaps of times customers crush instead day-to-day. normal to even that consolidate it's part wallet, of so they as share of, do And a this during these like their little bit of their shop look continuing notion

through continue will trend that believe we the so half of back year. the And

our such the Chewy our gain verticals particularly of and that Secondly, continues year back a as the data driving half through prescription the as point we're here today Health, of app penetration we provided well. traction. medication, mobile to continues bit into food three, And a stating that

the build percentage customers more orders little se. in engaged back per The that benefits through see app the going bit that in are is and the for also half, that of went to AOE we a

So are. that essentially back gives that it all of the the way Right we now, can us deliver us. half hold we in confidence the that

On more a recent it's value-conscious. little we right. deals These recent, have cohorts customer more side, been the - seeking and that

are And or kind so repeat to order behavior the in to basket kind as up, really like we're we want them this what cetera, ASP of ramps and watching - is cohort just cetera. be, this rate carefully et demonstrated expect understand one et there of being cohort sizes we're compression

deploy and we're a going serving tactics make to of So as value convenience. series well kind ourselves sure as protecting that we primarily, of both are to

overall, we here. playing So feel good from out

impact kind And are it. to utilization about of the and or think you're the historical? that seeing of way that already facilities one kind of from you've sneak Got those where automation you of in just given Any kind quantify scale automation. I

back points two will in ramping. so today We're to our launched points Yes, share we've our to that announced are recall, basis for year. roadmap the to other actually for year. provide. Day future half excited Of one and leverage provide the our Investor to that ramped actively launched, us. on-track the have left open remaining retrofit you we that if that to XX with two fulfillment the we ramp, serve at should new center this have four you room ideas the of centers, Of fifth we of we expect starting future in are XX next the four, and we XX leverage are And of every roughly that fulfillment basis will

So we're always on side. supply track on transformation the

much. you very Great. Thank

Mr. you, Thank Carden.

next Our is with from question Mark Mahaney Evercore.

proceed. may You

wanted I ask to Thanks. question ads. a Canada the launch on sponsored on and

Like, until would On of only the you late nothing. show it the know launch, could successfully quarter if the a quarter? start if of should and that up timing in successful, that quarter us QX? it's or I September net starting seeing from give already a during And, the in in Canada is we launch, adds sense we're talking

all are contribution, on start Thank with a that? sponsored then growing I'd you're working ads, party just but to trying to that be So, I understand timing? small media networks organically guess doing you. retail internally And or the third you this

version this Mark, most and short the so ads are really we of of launch ramping so Sure, expecting answer. in that on QX. On Canada, doing we're internally, sponsored that's imminently it starts

for this - QX, we in impact built year. would the in materiality forecast likely haven't we will the start impact any but our So feeling start in

Thank Okay. you, Sumit.

Sure.

you, Thank Mahaney. Mr.

Fargo. Our question Brian proceed. Fitzgerald Wells is with from next Please

opine XX%, The you guys. couple can get do a think of cross-category of and maturity to little penetration different Thanks to different and that that products as hitting follow-ups. you SKUs follow-up services? that think continue how on add form of bit and and much eventually And $XXX, you then can accelerating? with on NSPAC what's household you on A going is spend capture where can at you

Sure. Brian. Hi,

we Chewy On our company in be should Rx, also where the of one inside Pharmacy the a priorities one customer. believe cross-category for is every top Chewy customer active

of is for So so year-over-year us excited there recaptured. here are NSPAC, has household is or accelerating a a that. and can and here. headroom positive on accelerated And yes, lot it basis, all spend we about

believe opportunity we but - we're in to closed actually we has capturing customers, food today. ago, health also spend gap which the our loyal a Supplements their and pretty of NSPAC was that last segment expansion credibly us. for two for an likely year, are majority for We years us contributed the

you $XX is the opinion. That and it are of medication and is is consumers' whether diet or consumables mindset consumer constitute in recovers pets. on the out be merge these that being macro thanks and OTC, $XX there, consolidating prescription food, up the kind of of $XXX gaining now health, health, And or supplement, hard to used our happened spent where allocated past, goods. on we remain classes towards shifted actively or today. we that it's will hard and and health, so Because most truly if So recall, toppers, In what's it that consumables on until goods on $XX is believe share.

online, our we we've a made quality spend will of through execution We the level much all endured to the in the both to pandemic team Long-term, I believe, a stronger given continues we're investments as Overall, we're that about the the as from played - future. the that short-term and have to base, move - it offline that collectively actually macro bullish the through. company the fact future, emerge continues demonstrate. we're just

Thank much, it. appreciate you so

Thank you, Fitzgerald. Mr.

Schenk Morgan Stanley. from Our is Lauren next question with

You may proceed.

industry getting goal the that penetration dig bit Thank how of XX% Feather road-map. pharmacy you Hi, It's today the versus to little we Perhaps and cross-category Lauren. from you. in a What that hop XXX%? everyone. could gets adopt side, of Nathan And expansion to encouraging the SKU customers more for the on it? from discover on more you much

great primarily essentially our is question. the of it's this and discoverability Primarily it's - challenge platform trust. so primary - a customer Yes, winning

noticed, recurring a consume third you at point, of frequency. States don't you I at their If pets don't or data if today may the the mentioned medication United have in frequency a customers this the recurring visit or recall,

of not only to that see the back And by power have we the incremental we on current the an the and by have expand been this particular of compliance truly go-to-market we opportunity customers so - TAM how that platform. space, our has in also Autoship driving opportunity essentially with driving we

and whether it's sort platform friction So are at our of make Autoship any team. high eligibility whether proud for customers. we sign or that and whether actively innovating it's continues remain par a pretty of higher our around experience, to is the or addressed by on or we're businesses being checkout this serve it's to kind customer Overall, large our even rapidly is of pharmacy to than base sign-up consumables NPS - discovery sure customer

this it's less there more is discoverability. awareness just sure about well much about as is SKUs, making that So adding as

you. Thank Okay.

Thank you.

next from Young Barclays. question with Trevor is Our

proceed. may You

for Great. Thanks questions. the

expect here to growth bit basis, update the and it from compares, insurance a then you or that stays that And discerning that a of any Trupanion cadence does that growth initiative, with more with on make and Lemonade. your tougher in customer more it challenged? likely looks on like kind improve hard First goods quarter. the expectations do returned category Is consistent to and

nationwide. think that's now I available

own any you. relative on comments expectations? can any light to uptick initial And that your how Just there P&L? Thank shed maps the to on you

This is Trevor. Hi, Stacy.

So hard take the question, good first. I'll

in always between So first a historically, hard sales goods second our some quarter. do have with we small the pullback seasonality and

shown about also recently, good value-seeking with consumer spoke to some that hard Sumit the growth by in contributed for softness that quarter. this combined So the behavior

the really changed, of year for the yes. expectations have Our rest not

also On it's hard goods, easier comps.

last best-in-class much from are expected. about as QX high two providers we year. noticed so decline having last super-excited you comping Lemonade low-double-digit On single-digit, a softer our and Trupanion you're a If insurance, was almost negative, on year platform and

points has opened various plans to rate sign-up to has policy price coverages is because on incremental you indirect translated and it proportionately that of a it's you opened the the what to coordination of drives would pretty wider choices has gone a up basis. assortment, up the up as it And across revenue What done and is, different range expect our range of customers.

the direction. positive that's and itself while metrics a this point, ton and education requires So awareness, seeing we're our in had of positive vertical a data really

Our rate all and quote-to-conversion call-to-quote improving. are quote-to-conversion rates - or rates

customers basis, our therefore would information customer conversion. and is on educating also you providing a expect, about insurance and powerful high-cost pretty becoming As the the team driving care source of a driving actually

This hypothesis really to our because don't you always with, was insurance start online. buy

the it channels and of one channels via out these kind best You have assisted of assisted there. we buy

of I we're given on vertical, overall, excited a note is longer customers must a for that arc super the So this bit what's come. is about kind longer. that to consideration of you cycle

patient we're the over to this appropriately play be So game going and long-term.

Thank you.

Mr. you, Thank

Young.

Our next from with Wedbush. is question Basham Seth

You may proceed.

provide a like did trends and color you lot afternoon. to CAC on provide then was you And wondering recent some relative I good color gross year-over-year quarters? XXXX, ads in also some if on sequentially? Thanks could

to pace team a on entirely are, causing believe ads, executed gross has muted that run course, gross ads. of the are XXXX. dissatisfied Yes, the our So pullback We're categories We ads. by continue the higher incredibly. are gross not of than

customer is absolutely acquisition, I it the on think, weighing of is. in hard mentioned Doug contribution goods whether like

the softer the new dissatisfied much balance, pre-pandemic. is slightly ads. we're off Net Chewy but not than by totally pre-pandemic, pace of stronger But to reactivations are on than gross

two, gross you ads overall that if So those is than output combine the is stronger XXXX.

picking then were up has up. you because lens But economically. CAC, then when years, And you come I continued the through which of couple CAC, of increased customers last pandemic, not quite shared CAC from and the the from much I were LTV the - up everybody to - go out candidly what we've last-time, the also on has least was LTV at believe picking color of intent viewed is to as over declaring changed has

we our we're ratios standpoint point of have a an So where very view. and actually should be maintained ROI believe marginal we spending nicely from spending,

right a opinion The continues now to is in up reason will pool remain CAC and macro go shallower A, high of intent. is, customers up my the declaring until recovery there

that yield to the clearly, years And rate. active up a B, and same used for of be higher the channels. is drives has in competition led channel few pretty bid and of up recall drives then, that targeting the that the actually a the ago customer social social loss So CAC a to loss

combination of going those LTV two, is it's appropriately. a up So but

just weakening And is that - for most And LTV the find you're That's not, if going direct CAC is Are LTV recent helpful. as is follow-up, cohorts? recent appropriately customers where most up the customers? ratio going adjust a you cohort new for to spending too?

We actually. always do,

just where sort diligent been the negative so campaign to we've become steps that is effort point find actually spend tangential to - team experimented discretionary right the trying the over customers of not we pick high to where after. now. very go the far actually contribution trying always profit cumulative the where what So returning. a it's up to money And we're point has with to and and the ROI fact

quality after churn that and purchase, would this customer spiral rather you to spending really keep going never the really drives not per that, we that otherwise out se. the money of we're get repeat because So of maintain

so basis, quarterly on best weekly, daily, the engines, not are fairly find channel. teams We're And return is to - that And adjust monthly we our basis. across appropriately our the customer, a best responsive. best the marketing performance done a on

you. Thank

Basham. Thank Mr. you,

Horowitz next Deutsche from with Lee Bank. Our is question

You proceed. may

that medium-term? the caution I when in structurally are modest in could, acquired core, the turn taking way household leads that growth to anything users caution churn bit can digging questions. users, in than the cohorts Chewy these you're if back these amongst platform in existing and Thanks to Two on for that in return meaningfully to to pet And to pet seeing do is this flagging believe, environment, more the think your size, you seeing consistently through talk you higher degree base? relative purchase think about Thanks again positive need these from you some a much. just order this more you maybe more repeat Autoship penetration as recently you the you you cohorts user of so you rate, the meaningfully are challenged and of these maybe what growth basket growth then to Great. specifically household positive terms maybe

Sure. Sure.

and dependent into it's of there a first turn to do them we we not is Well, are more not the that important an what factor. meaningfully - question the it on. a Household solely positive? it's On But is input penetration certainly the need model. is factor -

will are year next into features and back which - se. this the in multiple half, continue per fact, this of which is kind continue we In teams all will chewy.com, expect progressing - across for our some of

- well as both friction improve which reduce and - areas conversion of Our rate chewy.com, we we credibly across sign-up example as barriers account where is to for features lower team and will creation expect right. multiple retention, expect progressing customer in

CRM examples about, our call. be the creation, more detail So of in earnings might will some talked next account or of our at I areas content we've payments, mechanisms which in our specific platform, discuss

Chewy to But for launch. we're you progressing about super excited an we're early talk loyalty, XXXX to which

to endured. sitting for we're what So waiting this macro to recover, notion not cannot has cured be we're not be the of just idle, It's right.

side, that to going to which and and endure customers, at opening we focused on are same we're everything experience controllable that. avenues is our retain the up new that So acquire is on improving time, and absolutely

We're recent repeat are slightly actually frequency? with what then what because frequency it's fairly value the more repeat sizes that order was is second mentioning on basket I penetration order the intact. cohorts, Autoship question they're speaking. more are seeing was earlier. Their lowered essentially seeing your And you -

obviously, So, lower. rates that taking slightly is is an attach there compression ASP there. place are Their

our kind and goes will back where size per of to that bases. order more customer metric kind So they also. you impact, frequency, the nudge relative loyal talk see need the of ultimately units little Repeat a which basket to order is

we're into - guidance that baked just essentially And we're the the baking that well. right watching customer we're that active So and as we've forecast now. into ads

Very you. helpful. Thank

Sure.

Horowitz. Thank you, Mr.

Steven Guggenheim. Our from next Forbes is with question

may You proceed.

Stacy. Sumit, evening, Good

quick two one follow Autoship pharmacy. on and Just ups, on one

right also are about comment on first within you Can talk on Sumit. So on average cohorts you net Autoship, trending, some years lifecycle? of the relative like to to usage try plan? that how customers maybe importantly time ownership convert in rate customer journey in customer customers those pharmacy, into most statistics, for as And mature then churn can and earlier by number ordered more has the such Autoship trial, pharmacy among the adoption your over pharmacy the how evolved

able We've done you're customers your be for generally not may that of the powerful your sure asking, under by to a but satisfy and it in full more relative maximized. that is some value I'll to passing onto be way build is making the that accreting intuition that assortment customers. that. value I Autoship that metrics continues curiosity Sure. in to Autoship stating

sure conversion to Autoship whether may Autoship be that whether related payments related have barriers either or there making retention, be lowered. may continued or be We've there also to attach done that by

a customers Our with future. in only little speak ability does get improvement in to segmentation that'll and better the meaningfully targeting and allow more us

customers attaching invested cohort discoverability are a attached products, meaningful only from attach them essentially to make that point-of-view, not sure our a kind engine then and complementary of through development in across manner. And we've discover but

and Autoship, trust is they behind very flexible they won't Autoship. trust a is, have that to the of both they flexibility you're that is we at. trust the put and - beauty leading looking incremental of customers to come all So it Autoship this program reliability that and Autoship essentially, sales the

point-of-view, overall point-of-view. experience point-of-view, And from so also it's program a a but pricing from an only high-value that from not,

we e-commerce this side, of healthcare Rx offer retailers per of se. the On best can customers we the, there that find experience the the kind is that believe can best in out have or

of other So - our pharmacy even some adoption Autoship in than is in our adoption is merged metrics it pharmacy, our higher on classes.

make have we're Our these. with opportunity we're Overall, on high a And excited have. churn products this like at get we same we bar that how time, given sure better the that working rate vertical. is even lower, to we always about

Thank you.

Mr. you, Thank

Forbes.

of line James. question Patel the is last Raymond with Rick from Our

proceed. press may You

customers Thank you you. afternoon, and seeing you're in are think So to curious that trend Good lifecycle, of those in we terms their just that spending talk new by line? but spending Chewy? I about is everyone. about much seeing not appreciate you're - how cohort for changes customers as if further Can 'm what are that back along growing, in

Yes, we are. We absolutely are.

- like In little call, more as cohorts kind this - more require slightly are our mentioned a older recent fact cohorts. our through our we've curves But on of NSPAC they nudging. the development

NSPAC main look [indiscernible] mixing is se. other the the maturity kind development, per it factors the combination other health plus of two which by a at leads followed kind If right, cohorts and of way, of off three you Autoship

So of click. to numbers, to a if happy building, that's take specific without enough -- double hopefully, kind intuition happy talking not, to

how Chewy? you And next anything brand are about to of about are go-to-market can new experience as quarters couple going Great. marketing about talk of you going Toronto? And to also customers strategy Canada? they for think spend and terms to the over in learn your How in the ramp

sure. Yes,

excited very about some - - this So we're is this is this.

aspiration think will is, statement Canadian manner model the desires, what in I an not line show their the to going we the their their wants, - customer, best understand that in offering to are their possible manner. try and we that needs, then a and appeals in them in so a that - as We you here are Canada as up our should going the brand, hear that is - to essentially, is we American brand punch and will to, behaviors,

the more of the nicely. se. - to a way to do keeping market believe our we most much by to delivering minimalize the going over kind We're That proven carry here pretty have efficient United that be we those through customers States, way is mechanisms efficient trusted on of per experience cost and most and way focused also the in the

leadership was with ago. of rest I team, in few a the senior the Canadian the weeks market

try same not sell this of the investments delivery here. a way here. Overall, high-quality dilutive to the There's fund required looking and bunch going growth, side fulfillment going from We're side, to high-quality all walk of about to them. excited. and and stores for be market. whether at time and growth Sort the to in - our experience upfront candid learn the we're a be will we're ton to end the And the

All you. best. the Thank

you. Thank

we you, closing for Mr. now I turn That over have Patel. to is all questions. Sumit the call remarks. time the any will for Thank

much. very you Thank

evening. wish want Just welcome you. everybody to Stacy again a nice and Thank

everyone. Thanks,

That call. Thank today's 'XX quarter earnings Chewy's year participation. second your for fiscal concludes you

You may lines. now disconnect your